In parallel with the study of employment effects, we examined for the Minimum Wage Commission how the introduction of the 8.50 euro minimum wage on 1 January 2015 affected the hourly and monthly wages of employees. The analysis covered eligible employees not subject to a higher sectoral minimum wage, based on the German Socio-Economic Panel. In the bottom tenth of the wage distribution, the average hourly wage rose by 15 per cent between 2014 and 2016, whereas the increase over the previous two years had averaged one per cent. The causal analysis confirmed the effect: for employees earning less than 8.50 euros in 2014, the minimum wage raised hourly wage growth by 6.5 per cent up to 2016, or around 50 cents. The effect was particularly strong for groups with low wages to begin with, such as employees without completed vocational training. Two findings qualify this picture. First, the working hours of these employees were reduced, so that the wage gain did not translate into higher monthly earnings. Second, in 2016 around 1.8 million eligible employees were still earning less than 8.50 euros per hour, meaning that the minimum wage was not universally enforced. Spillover effects on wages above the threshold were not observed up to 2016.
Additional Information
Partners
